A ‘Secure’ Future for Rangers

In what seems to be the never-ending Rangers saga – we have a new chapter. Mike Ashley, owner of Newcastle United, has offered the club a £10million loan, which it seems they desperately need. But, like all things, there’s a catch – it would be secured over Ibrox Stadium. What does this mean legally, and why should it matter to football fans?

What’s going on?

After the demise of Rangers v.1, the club and it’s assets (including Ibrox) were bought by Charles Green (who may or may not have been a front-man for Craig Whyte) – and are now owned by the company that owns Rangers. At the moment Ashley owns the naming rights to Ibrox, meaning he could rename the stadium whatever he wanted, but he doesn’t actually own the land.
But Rangers are in desperate need of cash and they have two options before them:

a £10 million secured loan from Ashley, over Ibrox and the club’s Murray park training ground.

a £5 million loan from the ‘Three Bears’ consortium – led by Douglas Park – secured over Murray park only.

The board have decided that £5 million isn’t enough, so have considered Ashley’s offer. It’s important to note that Ashley isn’t trying to buy the club – the SFA have said he can’t substantially raise his shareholding because of his Newcastle ownership – but is just looking to secure his loan, in case the worst happens. A £10 million loan should tide them over for a while at least. Ashley isn’t offering to buy the ground – most likely because the fans would never support it, and the last thing Rangers needs is a fan boycott. Instead he is wanting a security over Ibrox and the club’s Murray Park training ground. The idea that the Board was willing to to even consider putting the stadium at risk seems to have been the last straw for many…but what’s actually happening here?

The Law

When you buy a house in Scotland, most people have to go to the bank for a loan. In return for the bank giving you this loan, they will ask to for a ‘Standard Security’ against your house. You then use the loan to buy the house and you become the full owner. But by giving the bank the Standard Security, if you fail to pay up on time, the bank could sell the house to get their money back – even though they don’t actually own it.
This is what Ashley is wanting to do. He isn’t offering to buy Ibrox, but just use it to make sure he gets his money back. But the context of this is important. Rangers are in serious financial trouble and need the cash or they might not get through the month. Much like many people in desperate need of credit, they’ll get round to figuring out how they’ll pay it when they need to pay it. It is entirely possible that Rangers might not be able to pay it at all. if this happens, Ashley would be well within his rights to enforce his security and sell the property – possibly to himself. This could mean that:

Ashley loans the Club £10 million, secured on Ibrox and Murray Park.

The club can’t pay, so the security is enforced.

Ashley buys the stadium through the security, paying himself for it.

Ashley gets the Stadium for a net loss of c.£10 million, which isn’t a bad deal.

But, just because this isn’t complicated enough situation, all of this may not even come to pass. In order to have a security over land, it has to be registered in the Land Register – which has not yet happened. This should be good news for Rangers fans…but it’s not that great. While The Board haven’t granted the security yet – they have granted an ‘Advance Notice’ to Ashley. Usually things that are registered earlier have priority of those registered later, but the Advance Notice is a brand new invention that means that any security Rangers (may) grant Ashley in the next 35 days will have priority over anything else registered in the meantime. This would suggest that the board are seriously considering Ashley’s offer, and he just wanted to shore up his position in case the club need money from another source as well. At the very least, it means they can’t seriously consider the Park Consortium’s offer for at least a month.

But even the way Ashley’s securing the loan is interesting. He decided to go for a standard security (which is a type of ‘fixed security’) as opposed to a ‘floating charge’, which is perhaps more common in relation to companies. The floating charge would have hovered over all of Rangers’ assets and only become ‘fixed’ if the company entered administration or liquidation. This flexibility is favoured by creditors (because it gives them a range of assets to choose from) and debtors (because they are still able to buy and sell assets – eg. like players – in the mean time). The disadvantage is that, were additional securities granted before administration the floating charge would have ranked behind them – possibly leaving Ashley high-and-dry.
The fact that Ashley was demanding such a solid security at all should be of concern, but the fact that he’s asked for a fixed security (backed in the meantime by an Advance Notice) as opposed to a fixed charge should be terrifying. Ashley is essentially saying to the Rangers Board “I don’t know if you’ll be able to pay this loan back, so to protect me, I’ll be wanting your grounds thanks”.

This (still) Ain’t Over

It’s hard to know what will happen to Rangers this year. It’s clear that they are in desperate need of cash, and if they don’t managed to gain promotion this year it could be their ruin. But this most recent saga has shown as a few things:

Mike Ashley is trying his hardest to extend his control over Rangers by alternative means.

The fact the club have already granted an Advance Notice mean they are seriously considering the offer – in spite of the fan backlash.

If they do grant the Standard Security over Ibrox, the Board will have to be very sure they can pay the loan back, of the stadium could be sold from under them.

By asking for a Standard Security, and not the more flexible Floating Charge, Ashley can’t be entirely sure Rangers are going to be able to pay the loan back – and he wanted to protect his rights over any other creditors they have.

All this means that this chapter still has a few more pages to run, and even if Rangers do make it to March – they might have to think about all of this again. This story has a long way to run yet.

Hi Peter – you’re right insofar as “Mike Ashley” is different to “Sports Direct”, who’s actually the ‘buyer’ in this case, but in the interests of simplicity I equated the two since Ashley is (I think) super-majority shareholder of the latter , so in practice it makes little difference.